Auf Wiedersehen Piëch?

Lately, the mighty VW juggernaught has appeared unassailable. The Golf and Passat dominate their respective classes, while Audi and Porsche reap record profits on the back of a global luxury car boom. Yet serious fissures have appeared at the very top of the management chain which unchecked, could destabilise the entire organisation.

In an extraordinary series of events, Ferdinand Piëch publicly disassociated himself from VW CEO, Martin Winterkorn; previously favourite to ascend to the top job when Piëch retires in two years time, citing VW’s sales slump in the US market, coupled to a growing sense that Winterkorn has failed to get to grips with VW’s spiralling costs. The vaunted MBQ modular platform, developed at enormous cost is not delivering the efficiencies promised for it. Margins remain low due to high labour and engineering costs and more worryingly for them, VW have not benefited from the recent upswing in consumer demand across mainland Europe.

VW’s strategy in the land of the free has stalled and while resources are now being diverted to fast-track development of a range of US-centric SUV’s, it will be some years before they reach customers. Piëch believes the fault lies squarely with Winterkorn and in the run up to last week’s bitter confrontation with VW’s supervisory board, VW’s chairman repeated briefed against his former protégé.

Under fire – VW’s Martin Winterkorn. image via n-tv.de

VW’s problems are long-standing, culminating in last July’s announcement by Winterkorn of “painful action” aimed at slashing costs across the VW business, including the axing of unprofitable models. Yet VW simultaneously announced plans to develop a replacement for the Phaeton saloon, singled out by Berstein Research as one of the biggest commercial flops of the past decade. The original Phaeton was one of Piëch’s pet vanity projects. A new version will cost VW over €650m to develop, and with Mercedes’ utter dominance of the market, appears wildly irrational given VW’s pledge to slash costs. Quite frankly, to single out Winterkorn in this manner looks more like an attempt to paper over his own commercial hubris and lack of fiscal rectitude.

This week, the plot thickened further. Faced with a united front across VW’s supervisory board in support of their embattled CEO, Piëch has been forced to back down and support him, sparking speculation over his own future. Automotive News reported that Dr Piëch’s position has been significantly weakened, quoting anonymous sources who said; “Piëch was completely isolated. The question of who will chair the board [when Piëch retires] won’t be decided until 2017 unless Mr Piëch draws the consequences after this crisis which he alone provoked.”

VW’s rivals, most of whom would kill to have some of their problems, can take comfort in the fact that despite the group’s overall dominance and strength, serious fissures are appearing. There will be moves within VW to contain this situation as quickly as possible but this unseemly spat can only disrupt efforts to right some of the group’s more pressing structural problems, while ensuring an ordered succession. But while this soap opera drags on, damage is being done to VW’s reputation for managerial competence.

Dictators often lose their grip on reality just before they’re forced to cede power. VW’s once unassailable Chairman has not only become the story but appears more and more like a liability than a leader. Has the great manipulator been outmanoeuvred, or does he have one final ace to play? Find a comfortable pew folks, and watch the feathers fly.

7 thoughts on “Auf Wiedersehen Piëch?”

Some commentators here in Germany still believe that Piech has another ace up his sleeve, but I happen to believe that he’s chosen the wrong opponent in WiKo. The man has learned too much from his past master and is too much of a cold-blooded technocrat himself to be pushed out as easily as others have. WiKo certainly wouldn’t do “a Pischetsrieder” (or Demel, Bernhard, Demel, Paefgen, Kortüm et al, for that matter).

What a contrast this corporate soap opera constitutes, in contrast to the smooth handing over of reigns currently taking place at BMW. I wonder how Piech and the Quandt family get along.

It will be a pity if Piech loses. After so long, he has become the Hannibal Lecter of the car industry, and not just because of a sometimes un-nerving physical resemblance. You know he’s not quite a good man, but you can’t help but cheer when he styishly dispatches yet another victim with a dry wisecrack.

I am not saying that the ends justify the means but short of acts of war or criminal notoriety, Piech has achieved an enormous amount without doing any serious harm to anyone. Essentially, VW is among the largest makers of automobiles in the solar system and they range in price from a few months´wages to a milion euros. He has managed to ensure that competence has predominated over incompetence from his boardroom down to the paint-shops and assembly lines. He runs an entity more complex than the bottom 100 countries on Earth and does so without prison, warplanes or letting orphans starve. When I look at GM and Ford and see how much they resemble small and unruly states it is understandable that their corporate will can´t reach all the way into the small corners where dumb decisions can get made (Ford 500, Pontiac Aztek, Ford Focus seats, Cadillac Catera). Their mistakes seem understandable as the failures of governance that any state might make. Then consider how rarely this problem affects VAG and one realises that FP has put in place some very effective channels of communication that allow information to flow unhindered up and down the corporate structure.
In former times some of the Holy Roman Emperors retired and went to monasteries to live out their days. They did this having done all they could do and having survived the rigours of battle and touring with their courts. With this in mind I suggest Piech reflect on his success and simply retire to a nice quiet place in the Black Forest and pass the time restoring old Audis and Seats and VWs. There is a lovely house overlooking the monastery at Beuron that would fit the bill.

I already own a habitable manor near Salzburg.
I have a space reserved on my cupboard for the polished inlets we’ll attach to our new Alfa Romeos in a few years.
I already have secretly spent a decade at a Japanese monastery, while one of my better body doubles took care of things back home. Upon my return, I had to dispose of that Bavarian man with the beard. And the body double.

As you’ll understand, there are still a lot of things requiring my attention.

Thank you for acknowledging that I have never meant any harm to orphans.

Piëch has the right arguments – but he has chosen the wrong moment.
The level of suffering is very low – Winterkorn managed to satisfy shareholders and employees – so they are not willing to began a riot.
The greatest part of the profit is achieved by Audi – not a comfortable situation. And regarding the model range of Volkswagen in the US, i wonder that they are still selling some cars….http://www.vw.com/models/

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Driven To Write was founded by three like-minded writers frustrated with the polarised motoring journalism on offer. Our aim has been to publish the kind of diverse and original content no-one else appears interested in producing. Off-message, idiosyncratic, quixotic or sometimes just daft, while we sometimes tip our hat to the daily spin of the news cycle, as soon as the tub stops rotating we march unapologetically on to a different drumbeat - even if it's one that only we can hear …

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